FATCA: Foreign Account Tax Compliance Act and South Africa

By Expat News

American expatriates residing abroad must be prepared for the upcoming FATCA changes in South Africa. US citizens and green card holders should read What is FATCA to learn more about the Act. On February 8, 2013 the South African Revenue Service and National Treasury initiated negotiations with the USA in regards to the Foreign Account Tax Compliance Act (FATCA). If this FATCA is signed, it will decrease the cost of the compliance for foreign financial institutions (FFIs) in South Africa.

The FATCA model of intergovernmental approach in regards to the automatic exchange of information between governments is expected to be implemented as a part of this Foreign Account Tax Compliance Act. American expatriates should anticipate that it would be the exchange of information between South Africa and the USA on a reciprocal basis within a framework of the existing double taxation agreement between two countries.

Per the latest information, the FATCA will become effective in 2014. Foreign financial institutions have to enter into an agreement with the Internal Revenue Service to avoid a 30% withholding tax on any investment income earned from US assets by FFIs. South African banks, insurers, private equity funds, asset managers have expressed a strong support for this FATCA inter-governmental agreement for the automatic exchange of information between South Africa and the USA.

Earlier we mentioned that the USA started negotiations with 50 countries to implement the Foreign Account Tax Compliance Act (FATCA). South Africa considers these FATCA negotiations in regards to an intergovernmental approach as an excitement opportunity.

American expatriates residing in South Africa must carefully review all foreign financial assets to determine whether they failed to file the FBAR, FATCA, PFIC and other US expatriate tax forms. American expats who need help with US expatriate tax preparation or other overseas tax issues, must consult an expat tax preparer that provides international tax services. International tax experts at Artio Partners are here to help you.